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Telefónica: “Infrastructures are improving every day, but OTT video consumption is growing faster”

Nicolas Lecocq, Video Strategy and Business Development of Telefónica, on plans to expand the telco’s lineup of linear channels on the Xbox platform, replicate the experience on other CE devices, and deliver over-the-top video services outside Spain.

What online video initiatives is Telefónica currently engaged in?

Telefónica Spain has been commercially running its IPTV business since 2005, and currently has 800k household customers. It is based on a managed network model, with end-to-end control of the ecosystem.

The service is available through a set-top box for any broadband customer receiving speeds above 4 Mbps, and delivers over 150 TV channels as well as VOD content.

In this territory we have also been running a managed mobile TV service over our 3G network since 2008, with 120k customers enjoying a selection of linear TV channels.

As a telecoms operator we are very confident in these managed network models where we can control the quality of the services we are delivering and make sure our customers enjoy the best experience at any time.

The company has decided to enter into non-managed environments too. We launched a bouquet of 12 linear channels available on the Xbox games console in December 2011. After a promotional period the service became payable through PayPal in April.

Any person with any connectivity, being a Telefónica customer or not, can join the service and enjoy premium live events such as the Spanish football league or the European Champion League.

Our project for the short term is to extend this model, by offering more channels and VOD, provide benefits for Telefónica customers and replicate the Xbox offer on a bunch of CE devices such as tablets, mobiles and connected TVs.

Do you agree that all television (including linear) will eventually move to IP?

Not on the short to mid-term for sure. We first have to take into account that there is a relevant percentage of households that do not have a broadband access at home, for different reasons (age, income, education…). They will continue to consume broadcast DTT content on a massive scale.

We also have to take into account the existing companies around linear TV, with a powerful and influential media establishment fighting for the survival of the current ecosystem. Just considering social and economical reasons, DTT has meaning and will last for a long time.

We are seeing how several audience segments (younger age, mid-upper incomes, higher education) are already evolving their video consumption habits (more non-linear content, personal devices, social sharing, mobility…), but without stopping their consumption of linear TV.

When compared with traditional distribution (DTT mainly on our territory), the total amount of time spent consuming video on IP networks still remains low, but the evolution we are expecting makes sure non-linear and IP will progressively become mainstream.

What needs to occur before that can happen in unmanaged environments?

The first and clearest thing is a relevant technological improvement in the Internet networks – there is a lot of economical effort already going on in this area. Infrastructures are improving every day, but over-the-top video consumption is growing faster with an enormous appetite for bandwidth from consumers.

The second thing is to find the proper business model around the investments. Telecom operators are spending lots of money on improving networks that allow customers to consume very high quality content from nearly any source.

The competitive environment is high and telecom operators offer larger broadband proposals at lower prices every year, which means every gigabit using our network generates a lower income and a lower return on investment.

It is clear that we are a relevant part of the puzzle and that any way the ecosystem reinvents itself it will have to take into account the infrastructure provider.

What plans does Telefónica have to deliver over-the-top linear video outside Spain?

Telefónica Digital runs a video unit that works from a corporate stand point, sharing best practices, selecting partners, building technologies and providing operating businesses with best-in-class solutions.

All LatAm countries as well as Telefónica Europe are assisted by Telefónica Digital to build their own commercial offer. The decision between managed or unmanaged delivery depends on every country’s infrastructure, competitive environment and telecom operator position.

There are relevant OTT initiatives outside Spain at different stages of development.

Nicolas will be speaking at the OTTtv World Summit event taking place in London on 5th-8th November. For more information and to register, please visit www.ottworldsummit.com

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